Workshop “ Transnational strategies in the automotive industry “ Centre for Innovation Management Research (CIMR) Birkbeck University of London 6 th February 2015 Fiat Chrysler: transnational trajectories and integration Giovanni Balcet (University of Turin, Italy)
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Fiat Chrysler: transnational trajectories and integration
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Workshop
“ Transnational strategies in the
automotive industry “
Centre for Innovation Management Research (CIMR)
Birkbeck University of London
6th February 2015
Fiat Chrysler:
transnational trajectories and integration
Giovanni Balcet
(University of Turin, Italy)
Multinational strategies in the
car industry
Multi-domestic strategies
Foreign affiliates oriented to serve domestic markets, as an alternative to exports and licensing local assembling of imported components, or locally integrated manufacturing.
Strategic functions, such as product design, R&D and finance, centralised in the home country one way technology flows from the centre to the periphery,
Main motivations:
access to attractive (large and/or emerging) markets
need to overcome protectionist barriers.
Regional strategies
An intra-group division of labour developed within a macro-region
Integrated activities, specialised and increasingly export-oriented foreign affiliates
The range of products tends to be unified on a regional basis.
Strategic functions, such as R&D and finance, may be partly
decentralised to the regional headquarters.
Main motivations:
access to integrated markets and cost advantages, through
economies of scale, specialization and sourcing in low wage areas.
Multi-regional strategies
The same intra-firm division of labour is
developed within two or three macro-regions of the
world economy.
The regional divisions benefit from autonomy
Trans-regional or global
strategies
Intra-group division of labour, integrating corporate
activities on an enlarged geographical scale, involving two
or more macro-regions.
Purchasing strategies to create a worldwide component
sourcing network Global Sourcing
Global engineering. Each region tends to specialise in
R&D, design and manufacturing of a specific range of
models, which is then produced on a world scale.
Interdependence between regions within the multinational
organisation.
Fiat Auto: history matters.
Multi-domestic strategies
and industrial cooperation
1950s - 1970s: local market-oriented subsidiaries …
Spain, 1953
Argentina, 1960
Brazil, 1973
… joint ventures and long term industrial cooperation agreements
Yugoslavia, 1954
USSR, 1966
Poland, 1971
Turkey, 1972
Fiat in the years 1970s and 1980s:
reacting to social conflicts
1968-1980: labour conflicts, strong bargaining power
of workers
Fiat reacted through:
organizational fragmentation: externalization,
outsourcing
geographical fragmentation:
internal new plants in Southern Italy
international FDIs in Turkey, Poland and Brazil
process innovation, automation
1979 - 1995: divestments
from Spain
from Latin American affiliates except Brazil
1990s: local assembly of mature models in several countries
Turkey, Brazil, Venezuela, Morocco, India ..
Low volumes, old technology
Policy drivers: Protectionism Tariff-jumping
Local incentives
Regional strategies of Fiat Auto (I)
Poland in the European production network
1980: relocation from Italy of the production of an obsolete car (model 126) in cooperation with the State-owned FSM company. Export to Italy.
1987: agreement for an export-oriented product (Cinquecento sub-compact car)
1991: production starting, along with the privatization
1992: Fiat Auto Poland
Expanding the European network
2000s: Turkey exporting commercial light vehicles towards Europe
2012: Serbia integrating the European production network
Regional strategies of Fiat Auto (II)
Mercosur
1995: new greenfield investment in Argentina
1996-98: integration of production networks in Brazil and Argentina
Transnational advantages from a fragmented labour within a macro-region relational power
Main features of the Fiat project
of focused globalisation (1994-2005)
Production of the same family of car models and standardisation of the components worldwide, through a single platform, located in Turin.
Maximisation of the economies of scale through the target of producing one million vehicles in 2000.
Frontier technology of the new product, low prices, adaptability to the local conditions of demand (roads, fuel, regulations).
Product differentiation through a range of versions and motorisations of the models Palio and Siena, to respond to the various segments of local markets.
A flexible network of global sourcing.
Trade-offs:
- between scale economies and product differentiation
- between global sourcing and proximity of main suppliers
Hierarchy, specialisation and integration of the production units at three levels:
a) general direction, finance, R&D and product development located in Italy: key components, technology and knowledge flow to the whole system;
b) production poles, in Brasil, Argentina, Poland and Turkey, are exporting both vehicles and components to the rest of the system;
c) assembly plants in Morocco, Egypt, South Africa and India importing, components and serving domestic markets
Fiat Auto. Production of Palio and Siena Models, 1996 – 2003
1996 1997 1998 1999 2000 2001 2002 2003
Brasil 157,570 375,169 265,865 254,504 259,681 271,219 242,375 223879
Argentina 48,141 60,544 26,139 25,736 31,315 676 --
Poland 9,006 28,521 21,957 10,945 6,168 4,911
Venezuela * 9,766 8,858 1,867
Morocco 98 5,393 8,361 6,190 6,407 5,129 5088
Turkey 20,095 23,964 43,892 13,835 10,491 27,297
India 3,766 2,701 8,990 30,003 6,683
South Africa 137 6,822 8,161 5,531 4,931
Egypt 3,201 3,375 1,903 1,457
China 70 23,089 36,916
World 157,570 442,180 389,266 340,696 359,168 349,540 324,108 306,251
(*) disinvested in 1999
Source: Fiat Auto
The impact of regional and global strategies on Italian
trade with Poland, Turkey and Brazil
A two-stages pattern:
The launching of the World Car project
The maturing of foreign affiliates
Italy: bilateral car trade balances (€)
Source: Elaboration from Istat national statistics of trade